Building A Bigger Constrution Business: What You Should Evaluate Before Buying Equipment
Posted on: 20 January 2015
When you've come to the conclusion that you need a specific piece of construction equipment, deciding whether to buy or rent can be a complex process. Maybe you're looking at several big contracts ahead of you, or possibly your existing equipment is starting to show signs of wear and tear. In either case, there are a few basic things you should ask yourself when you make the choice to either buy or rent the equipment you need to get the job done.
Look at Your Current Cash Flow
Obviously your company's current financial position is one of the most important factors in this decision. In fact, not only is the immediate financial situation an important consideration, but your current projections for the next couple of years should also be a factor. You may have the capital to buy the equipment right now, but if you're seeing the potential for some other big expenses ahead, you might want to keep those funds on reserve.
Renting gives you the opportunity to do just that. If you opt to rent your equipment, you're spreading the payments out, allowing you to pay smaller amounts every month, so you have the chance to bring in revenue to offset the payment every month. For equipment that you'd rather buy, consider financing it on a long-term lease, or explore an equipment rental agreement with the option to buy. This gives you the best of both worlds, because your rental payments can be put toward the purchase over the term of your rental.
Consider How Often You'll Need the Equipment
Even if you have the cash flow to purchase the equipment, it may still be more reasonable to rent it. For example, when you're looking at a piece of equipment for a single job or for a couple of short-term deals, you may not want to buy it. That's a pretty significant investment for something you are only going to need a few times. In those cases, it's in your best interest to rent and control your costs.
On the other hand, if the equipment is a replacement for something you already own that's worn out, or you're looking at a frequent demand and consistent need, that's a different story. You may want to save the long-term rental cost by buying that equipment. In those cases, consider whether a rental with the option to buy might be your best alternative.
Don't just assume your need for it, though. It's easy to fall into a trap of thinking that because you've always had this piece of equipment, you still need it even if you aren't necessarily using it. Make sure that you've actually got several jobs lined up where you are going to need the equipment before you consider any significant investment.
Evaluate Your Inventory Control and Management System
One of the biggest challenges when you own a construction company or anything that requires large equipment and capital investments is managing those assets. You need to know that you are able to not only track the location and use of the equipment but also keep up with maintenance, insurance and other details.
If you don't have the time to put in to monitoring the equipment that regularly and scheduling preventative maintenance to avoid down time, rental is probably your best option. Not only do you not have to be concerned with the routine upkeep of the equipment, but if something breaks, the rental company will typically address it for you right away.
Construction equipment is in high demand, particularly as the industry grows and the commercial environment starts expanding. If you're looking to secure your company a spot in the top tier of service providers in your area, having access to virtually any piece of equipment is a great way to help do that. A reliable construction equipment rental service like LAX Equipment Rental can help you offer most any service by giving you access to the equipment you'll need without a significant investment. Consider these factors before you decide whether to rent or buy for your next project.
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